Social Security 101 What’s In It For Me?

Social Security Program The I stands for I nsurance OASDI Act of 1935 O ld A ge S urvivors D isabled Individuals who are retired Individuals who are the spouses or children of deceased individuals Individuals who are unable to work due to severe disability

Federal Insurance Contributions Act (FICA) Your FICA taxes fund the social security program. The social security portion of FICA tax is 6.2% of your gross income; your employer matches what you pay. As of 2016, you only have to pay FICA taxes on the first $118,500 of income.

Your FICA taxes are NOT held in a private account for you to use when you retire. Instead, they pay current beneficiaries. Your future social security benefits will be paid by future workers.

Social Security Cards The Social Security Administration (SSA) issues social security numbers usually at birth so they can keep track of your social security tax payments and benefits. Your employers ask you for your social security number so they can report your earnings and forward your tax withholdings to the SSA.

Work Credits You must have earned 40 work credits in order to receive social security benefits. You can earn up to four credits each year. In 2016, you have to earn $1,260 in order to earn one credit.

Benefits The Social Security Administration will calculate your retirement benefits based on an average of your 35 highest earnings years. As of 2016, the earliest you can start collecting social security payments is age 62. You will receive 75% of your monthly benefits. To get your full benefit you must wait until age 66.

Factors Affecting Social Security People are living longer. People are having fewer children. 20% of the population will be over the age of 65 by 2035.

Financial Cliff The number of workers per social security beneficiary has plummeted from 41.9 in 1945 to 2.9 in Social Security’s 2012 cash flow deficit was $55 billion. The Social Security Trust surplus will be gone in Since 2010, the SSA has been paying out more in benefits than it collects in FICA taxes.

Possible Solutions Reduce benefits. Raise the FICA tax. Seek additional funding from Congress.

Benefit Statistics As of 2012, about 56 million people collect Social Security benefits, and that is projected to grow to 91 million in Monthly benefits average $1,235 for retired workers and $1,111 for disabled workers.

Back-Up Plan Most experts feel you will need 70% of your pre- retirement earning just to live comfortably during your retirement years.